6 .) The personal, revocable, and unassignable permission of authority to do one or more acts on the land of another without possessing any interest therein, is the definition of
A.) A license
B.) An easement
C.) An encroachment
D.) An option

A
Answer:
This is a good definition of license. An easement and an option are not revocable, and an encroachment does not involve the permission of the owner of the property.


10 .) Which of the following is an interest, but not an estate, in real property
A.) Remainder
B.) Mortgage
C.) Reversion
D.) Easement

D
Answer:
A mortgage is a lien. An estate in reversion and an estate in remainder are freehold estates. An easement is the right of use as a non-possessory interest in the land of another.


6 .) In the government's exercise of the right of eminent domain, all of the following are correct, except
A.) It is the right of the government to take property from the owner
B.) It is an exercise of the government's zoning authority
C.) Just compensation of fair market value must be paid for the property
D.) The process of taking the property is known as condemnation

B
Answer:
The exercise of zoning authority by a governmental body is under the police power, not the right of eminent domain.


3 .) All of the following are needed in the creation of a mortgage, except
A.) A hypothecation
B.) A promissory note
C.) A deposit
D.) A trust deed

C
Answer:
A, B & D are all items that are needed in a mortgage.


8 .) An appraiser is appraising the value of an older building using the replacement cost approach. He would include all of the following items except
A.) Cost of improvements new
B.) An appropriate capitalization rate
C.) A separate appraisal of the land
D.) Depreciation

B
Answer:
The capitalization rate would be used in the income approach, but not in the replacement cost approach.


5 .) Broker Young showed a property to James. James signed a deposit receipt which contained the following words: Buyer to accept the property in an As Is condition. Broker Young knew that the plumbing in the property was in a major state of disrepair with parts missing, but he did not tell James. The problem with the plumbing would not be apparent to an ordinary, prudent person. If James sued the seller for damages based upon fraud, the court suit would probably be
A.) Unsuccessful because the As Is provision in the deposit receipt shows that there is a mutual understanding of possible defects
B.) Unsuccessful because the deposit receipt specifically states Buyer to accept the property in an As Is condition
C.) Successful because the duty to disclose a material fact cannot be avoided by an As Is provision under the stated circumstances
D.) Successful because As Is refers only to obvious defects.

C
Answer:
The Real Estate Commissioner and the courts are very protective of consumers. Therefore, they will not allow an As Is clause to be valid except for obvious defects, which any reasonable and prudent person could discover.


6 .) Jefferson hired the Blue Water Construction Company to install a swimming pool on their residential premises. In the event the construction company was unpaid and it was necessary for them to file a lien for payment of the contract, the encumbrance created would be
A.) A specific lien
B.) A general lien
C.) A voluntary lien
D.) None of the above

A
Answer:
This would be a mechanic's lien, and mechanic's liens are always specific liens because they apply to that one parcel of property and not all of the property of the owner.


6 .) A lessee rents a building from May 1 to July 1. His tenancy is
A.) Month to month
B.) Periodic tenancy
C.) Fee simple estate
D.) Estate for years

D
Answer:
An estate for years is a leasehold interest, for a definite period, with a specific beginning and terminating date. A month-to-month rental is a periodic tenancy and has no specific termination date.


11 .) Of the following, which type of title insurance policy would cover all risks
A.) Standard policy
B.) ALTA policy
C.) Extended coverage policy
D.) None of the above

D
Answer:
No title policy covers all risks. For example, no title insurance policy covers zoning matters.


9 .) A lessee renting a business office often attaches certain items to the real property. These items may, prior to the expiration of the lease, be removed provided no substantial damage to the property results. Of the following, which best exemplifies such items
A.) Trade fixtures
B.) Fixtures for manufacturing purposes
C.) Articles affixed for domestic use
D.) Any of the above

A
Answer:
These would be trade fixtures. You would not attach manufacturing equipment in a business office and items attached for domestic use would not be trade fixtures.


8 .) Which of the following would not be considered one of the four areas that contribute to value
A.) Desire
B.) Utility
C.) Scarcity
D.) Transferability

A
Answer:
The four elements of value can be remembered as DUST: Demand, Utility, Scarcity & Transferability


1 .) A broker's authority to accept a deposit on behalf of the seller (or to hold a deposit check pending acceptance of an offer) comes from which of the following
A.) Deposit receipt
B.) Escrow instructions
C.) Listing agreement
D.) Transfer Disclosure statement

C
Answer:
Another characteristic of California foreclosures is its One-Action rule, which allows lenders to pursue only one specific avenue against defaulting borrowers.


5 .) It is a requirement that most real estate records be kept for a period of three years, commencing from the date
A.) The property is first placed on the market
B.) The listing agreement, if the sale is not consummated
C.) The date the appraisal takes place
D.) The date of the first meeting of the principle and broker

B
Answer:
Records are to be kept for three years, either from the date the original listing agreement is signed if unsold or the date the transaction closes.


9 .) According to generally accepted practices, an escrow agent is authorized to
A.) Give the buyers advice about the best financing which is available
B.) Change the escrow instructions when asked to by the listing broker
C.) Call for funding of the buyer's loan
D.) Authorize a pest control company to make corrective repairs

C
Answer:
The buyer authorizes the escrow agent to call for the funding of the buyer's loan in order to close escrow. Termite repairs usually have to be authorized by the party who will pay for them, and the agent cannot change the escrow instructions without the written agreement of the buyer and seller.


2 .) Which of the following would not terminate an offer to purchase real property
A.) The offeror communicates notice of revocation after the offeree has properly posted acceptance
B.) A counteroffer from the offeree
C.) Death or insanity of the offeror
D.) The offeree fails to accept the offer within the prescribed period given by the offeror

A
Answer:
If the offeree has properly posted acceptance, this means that acceptance has been communicated back to the offeror. In this situation the offeror cannot revoke the offer, they would need to use a contingency in order to withdraw from the contract.


9 .) In order to calculate accurately a gross rent multiplier, the appraiser would obtain from comparable properties the
A.) Net income and selling price
B.) The original cost and the annual income
C.) The annual rent and the selling price
D.) The net income and the capitalization rate

C
Answer:
The gross rent multiplier is arrived at by dividing the monthly or annual gross rent into the selling price of the property.


6 .) Mrs. Smith held a life estate in a single-family residence. The estate was based upon her own life. She leased the residence to Mr. Jones for a five-year period, The lease was
A.) Invalid on its face, because the holder of a life estate does not have the right to lease the property
B.) Valid for the remaining term of the lease
C.) Valid for the term as long as Mrs. Smith is alive
D.) Valid only if Mr. Jones was unaware of the life estate when the lease was created

C
Answer:
The holder of a life estate has rights in the property only as long as the designated life exists.


7 .) To alienate title to property, one
A.) Encumbers the title
B.) Clouds the title
C.) Records a homestead
D.) Conveys title

D
Answer:
To alienate means to transfer or to convey


6 .) The total number of lineal feet on one side of a Section is
A.) 1,000
B.) 2,640
C.) 5,280
D.) 43,560

C
Answer:
One side of a section is one mile long, or 5280 feet


6 .) A metes and bounds description of land would be used when
A.) The U.S. government geological survey system is used
B.) The streets bordering the parcel do not run due north or south
C.) The land has not been surveyed by a licensed surveyor
D.) The property is not covered by an already recorded map, and cannot be described by section, township and range designations

D
Answer:
Metes and bounds is a surveyor's method, so when describing a parcel not already covered by a recorded map, or not of such size as to be describable by the U.S. government survey method, metes and bounds is the method used.


6 .) A person who held a life estate leased the property for five years. The grantor of the life estate didnt agree with this lease and asked the new tenants to move out. The lease was
A.) Valid for the five years
B.) Valid only with the permission of the grantor
C.) Invalid from the beginning
D.) A life tenant cannot grant a valid lease for over one year

A
Answer:
The holder of the life estate could only lease what he had which was the use of the property until they die.


2 .) Unknown to the seller, the offeror died four hours prior to the seller's acceptance of the offer to purchase. Concerning the preceding, which of the following is most correct:
A.) A contract exists, but either party may rescind within a reasonable length of time
B.) A contract exists and it may not be rescinded by the executor of the offeror's estate
C.) The offer was revoked by operation of law upon the offeror's death
D.) A contract exists, but it may be rescinded by the executor of the offeror's estate.

C
Answer:
A binding contract does not exist until an offer has been accepted and the acceptance of the offer communicated back to the offeror. Prior to the acceptance being communicated to the offeror they could withdraw for any reason whatsoever. In the situation presented, the offeror's death automatically terminates the offer.


1 .) Which of the following best describes the actions of an agent under a dual-agency
A.) In a dual-agency transaction, the buyer cannot choose their own broker or represent themselves
B.) A dual-agency means that one agent is representing the seller and another agent from the same office who represents the buyer in the same transaction
C.) A duel-agency broker is client-oriented
D.) Both of the principals in the transaction have employed the same agent to represent them

D
Answer:
Representing both the buyer and the seller in the same real estate transaction is called a dual-agency. By law, all states require that dual agency be disclosed to all parties in the transaction


3 .) Which of the following statements is most nearly false concerning the activities of mortgage companies
A.) They prefer to work with conforming loans so they can be easily sold
B.) They will service the loans they create
C.) They prefer negotiating loans which are salable in the secondary market
D.) They are not active in the field of government-insured loans

D
Answer:
Mortgage companies often do service the loans they originate, are active in FHA and VA loans, and are usually organized under state laws. They often negotiate loans which are sold on the secondary market.


6 .) Land that is subject to an easement is said to be
A.) Appurtenant thereto
B.) Encroached upon
C.) Encumbered
D.) Restricted

C
Answer:
An easement is an encumbrance. The easement is appurtenant to the land, not the land to the easement. Liens and deed restrictions are also encumbrances, but of a different type.


2 .) Brian acted as an agent for Peter without having the authority, or the appearance of authority to do so. Peter later chose to accept Brian's unauthorized acts. This is an example of the creation of an agency by
A.) Implied contract
B.) Ratification
C.) Estoppel
D.) Misrepresentation

B
Answer:
When an agency is created by ratification, the agent has been performing as an agent before he had the authority to do so, and the principal later accepts or ratifies his actions.


7 .) When a title insurance company issues an ALTA policy, it usually extends the risks which are insured against by the standard policy. The extended risks include all of the following, except
A.) Unrecorded mechanic's liens
B.) Unrecorded easements
C.) The effect of zoning regulations
D.) The rights of parties in possession.

C
Answer:
No title insurance policy insures against the effects of zoning regulations.


10 .) A standard title insurance policy insures against
A.) A recorded deed in the chain of title that was not properly delivered
B.) Claims of persons in possession of the property
C.) An easement by prescription
D.) Losses sustained by improved property only

A
Answer:
A standard policy of title insurance insures against matters of record, including improper delivery of a recorded deed, impersonation, forgery, and lack of capacity of a party to any transaction involving title to the land. It does not insure against claims of parties in possession.


1 .) What type of relationship exists between a real estate broker and their independent contractor licensees
A.) Agent and principle
B.) Employer and Employee
C.) Agent to sub-agent
D.) A legal relationship does not exist

B
Answer:
The relationship between the real estate broker and the licensees is that of an Employer and Employee, even if they are independent contractors.


5 .) A prospective buyer was told by the seller that the subject house was 10 years old as shown on the listing agreement signed by the seller. The listing broker and salesperson knew that the house was 15 years old. In this situation
A.) The broker and salesperson are fiduciaries of the seller, and owe their loyalty to support his misstatement
B.) Since the seller signed the listing agreement showing the age of the house as 10 years, the listing broker had no authority to change the information
C.) Both broker and salesperson had a clear duty to correct the seller at once by giving the buyer the correct age
D.) The salesperson could remain silent since it is up to the broker to correct the seller.

C
Answer:
Fiduciary responsibility does not include the support of a misrepresentation. The broker and salesperson both owe the buyer a fair and honest dealing, and hence, have the obligation to correct the misstatement


3 .) A homeowner failed to make payments on his trust deed loan for 4 successive months and a notice of default has been recorded. He has
A.) Rights of redemption
B.) Rights of reinstatement
C.) Loan moratorium rights
D.) Lost his opportunity to stop foreclosure

B
Answer:
The right of reinstatement allows the trustor (borrower) to make up any payments in arrears, owed to the beneficiary (lender), in order to halt the default.


7 .) A single family residence, which had an assessed value much lower than the current market value, was sold on October 1 at its current market value. The new owners will be obligated to pay
A.) Only the prorated amount of taxes based on the March 1 assessed value
B.) The regular payment due November 1, plus an additional month's taxes for October, based on the March 1 assessed value
C.) The regular payment due November 1, plus an additional month's taxes for October, based on the new assessed value
D.) A supplemental tax based on the difference between the old assessed value and the new assessed value for the remaining months of the fiscal year

D
Answer:
When the property is sold for more than the assessed value, a new assessed value is set by the county assessor. The new buyer will receive a supplemental tax bill based on that new assessed value, and must pay not only the regular tax bill, but also the supplemental tax bill.


2 .) A voidable contract is a contract that
A.) Was valid at the time that it was signed, but for some reason cannot be proved or sued upon by either party
B.) Contains all of the legal essentials that are required for its existence
C.) Has no legal effect because it really is not a contract
D.) Is valid and enforceable on its face, but it may be rejected by one of the parties

D
Answer:
This is a definition of a voidable contract.


8 .) Which of the following is not one of the four important elements of value
A.) Scarcity
B.) Appreciation
C.) Utility
D.) Transferability

B
Answer:
The four elements of value are DUST: Demand, Utility, Scarcity and Transferability.


9 .) An appraiser usually uses which of the following approaches in estimating the value of unimproved property
A.) Cost
B.) Income
C.) Gross rent multiplier
D.) Comparison

D
Answer:
In appraising the value of unimproved property, an appraiser generally will use the sales comparison method.


2 .) Of the following types of funds, which one does not have to be placed in the broker's trust fund account
A.) Rents collected for the owner on properties managed by the broker
B.) Unpaid commissions owed to salespersons
C.) Advance fees received to cover marketing costs
D.) Funds received from a borrower to cover appraisal fees and credit report costs

B
Answer:
Unpaid commissions owed to salespersons are not deposited in the trust account. The other three types of trust funds must be so deposited.


10 .) What type of relationship exists between a real estate broker and their independent contractor licensee’s
A.) Agent and principle
B.) Employer and employee
C.) Agent to sub-agent
D.) A legal relationship does not exist

B
Answer:
The relationship between the real estate broker and the licensees is that of an Employer and Employee, even if they are classified as independent contractors.


6 .) Under law, local government has the right to regulate and control land use. This right may include
A.) Regulations relating to repair
B.) Provisions for building removal
C.) Zoning ordinances
D.) All of the above

D
Answer:
Police powers do include the local government's right, under law, to regulate repairs, building removal and zoning ordinances.


8 .) When considering the vacancy rate of an apartment building under normal competitive conditions
A.) Low vacancy rates can point to strong rental demand
B.) High vacancy rates can point to strong rental demand
C.) Low vacancy rates can point to weak rental demand
D.) Vacancy rates do not correlate with rental demand

A
Answer:
A vacancy rate is the percentage of units in a rental property that are unoccupied. Low vacancy rates can point to strong rental demand.


2 .) In the exchange of real estate, a verbal contract is considered to be
A.) Unenforceable
B.) Enforceable under specific provisions of the California real estate law
C.) Enforceable
D.) Unenforceable in most circumstances

A
Answer:
A verbal contract is unenforceable as per the California Statute of Frauds.


2 .) When rent covers all items related to the property, and its upkeep, of which a business occupying, the lease is correctly termed
A.) A net lease
B.) A gross lease
C.) A voidable lease
D.) A percentage lease

B
Answer:
A gross lease is where the lessee makes one payment would covers all items related to the property. Including insurance, taxs and common area maintenance.


6 .) When an owner of real property is called a riparian owner, the land in question would border
A.) A river
B.) A watercourse
C.) A flowing stream
D.) Any of the above

D
Answer:
When a landowner has riparian rights, it is the right to a reasonable and appropriate use of water from a flowing source, such as a river, stream, or watercourse.


10 .) When rent is computed on the gross sales of a business occupying real property, the lease is correctly termed
A.) A net lease
B.) A gross lease
C.) A voidable lease
D.) A percentage lease

D
Answer:
In a percentage lease, the rent is tied to a percentage of the gross receipts of a business.


3 .) A borrower would apply for an FHA loan to
A.) FHA
B.) The arranger
C.) The broker
D.) The mortgagee

D
Answer:
If a person wanted to obtain an FHA loan they would apply to a lender such as a bank or savings and loan),who would be the mortgagee or beneficiary.


10 .) An owner of a 20-unit apartment house is considering installing a swimming pool and asks an appraiser for his opinion. The appraiser's opinion would be based on the principle of
A.) Regression
B.) Contribution
C.) Integration
D.) Substitution

B
Answer:
The principle of contribution holds that maximum real property values are achieved when the improvements produce the highest net return, considering the investment.


6 .) In addition to the land and those things that are attached to the land, certain things are called appurtenances and are real property. Which of the following would not be an appurtenance
A.) Watercourses
B.) Trade fixtures
C.) A dwelling
D.) A fence

B
Answer:
Trade fixtures are considered personal property. All the other choices are real property and benefit the land.


8 .) Sarah purchase a single family home as an investment property. Sarah paid about 15% less than the comparable properties in the area because the home didn’t have a garage. The average homes in the area all have 2-car garages. This reduction in value could best be described as
A.) Straight line depreciation
B.) Physical deterioration
C.) Functional obsolescence
D.) Economic obsolescence

C
Answer:
This would be functional obsolescence.


8 .) Which of the following would be used by an appraiser in using the income approach when valuing an apartment house
A.) Excess rent
B.) Percentage rent
C.) Economic rent
D.) Contract rent

C
Answer:
Of the choices listed it is the most reliable information on which to base the value estimate. The economic rent is the rent the property will reasonably produce. Hence, the market rent.


7 .) Involuntary alienation in regards to real property means
A.) The owner made a decision to sell the property on his own accord
B.) The owner made a decision to will the property off
C.) The owner was forced to convey the property
D.) None of the above

C
Answer:
Involuntary Alienation means the transfer of real estate by law and without the owners consent. There are for ways property can transfer by involuntary alienation. They areTransfer by Descent, Escheat, Eminent Domain and Adverse Possession.


5 .) A homeowner sued his broker for damages suffered because of the broker's misrepresentation. The broker had an oral listing with his principal and contended that he could not be held liable for damages in this event. The broker's defense is
A.) Valid because of the Statute of Frauds
B.) Valid because of negative fraud
C.) Valid because a listing contract for real property must be in writing
D.) Not valid

D
Answer:
The broker would be liable for any damages whether or not he had a written listing on the property.


7 .) In California, the current transfer tax on real property transactions is
A.) $.55 per $500
B.) $.55 per $1,000
C.) $1.00 per $500
D.) $1.10 per $500

A
Answer:
Property transfer taxes are derived from the selling price of your home. The California Revenue and Taxation Code states that all the counties in California have to pay the same rate. The current tax rate is $0.55 per $500 or can be calculated as $1.10 per $1,000.


3 .) The TILA-RESPA Integrated Disclosure combines the truth in lending costs of financing disclosures and the RESPA good faith estimate. The lender must provide a good faith estimate to the borrower within how many days from the loan application
A.) 3 Days
B.) 5 Days
C.) 10 Days
D.) 15 Days

A
Answer:
The TRID (TILA-RESPA Integrated Disclosure) combines the truth in lending costs of financing disclosures and the RESPA good faith estimate. The lender must provide a good faith estimate to the borrower within three business days from the loan application. The borrower has the acknowledge receipt of the LE and has ten days to decide on cancelling or continuing with the loan application.


7 .) A standard policy of title insurance protects the insured against
A.) Defects known by the insured to exist at the date of the policy that are undisclosed to the insurance company
B.) Lack of capacity of a party to any transaction involving title to the land
C.) The power of eminent domain
D.) Unrecorded easements

B
Answer:
No insurance will cover choice A which represents fraud, nor choice C which is governmental regulations. Choice D is covered by extended coverage but not by a standard policy.


9 .) What is the fiscal year for property taxes
A.) January 1st - December 31st
B.) April 15th - April 14th
C.) July 1st - June 30th
D.) November 1st - October 31st

C
Answer:
The property taxes become a lien on the property as of January 1st. The property tax fiscal year is July 1st through June 30th.


3 .) When the term Warehousing is used in connection with real property financing, the term would normally go along with
A.) A mortgage broker
B.) A mortgage banker
C.) A savings and loan association
D.) A real estate broker

B
Answer:
Warehousing is the term used to describe the activity of collecting loans prior to resale. This always goes along with a mortgage banker.


11 .) If a lien has been created by court action, and it covers all properties of the debtor in that county where it is recorded, it is known as a
A.) Lis pendens
B.) Specific lien
C.) General lien
D.) None of the above

C
Answer:
A general lien covers any and all property of the debtor in the county where it is recorded. A lis pendens and a specific lien apply only to a specific property.


3 .) The clause in a junior lien which permits a first lien to be refinanced without suffering a loss in priority is called
A.) Release clause
B.) Acceleration clause
C.) Lien waiver clause
D.) Subordination clause

D
Answer:
Subordination takes place whenever the priority of a lender's claim is made secondary to another lender's claim.


6 .) Subdivisions are controlled by which of the following under the Subdivision Map Act
A.) The real estate commissioner
B.) The local city or county
C.) Both (A) and (B)
D.) None of the above

B
Answer:
The Subdivision Map Act gives control over subdivisions to the local city or county.


2 .) An offer to purchase real property was signed by a prospective buyer on July 2nd. The terms of the offer allowed five days for acceptance from the seller. Because of an illness in the seller's family, the seller did not accept the offer until July 12th. Which of the following statements is correct
A.) The buyer may demand the return of his deposit
B.) The buyer must continue with the purchase because he did not withdraw his offer prior to acceptance
C.) If the buyer does not complete the purchase, the seller is entitled to the deposit
D.) If the buyer does not complete the purchase, the seller and the broker will each be entitled to one-half of the deposit

A
Answer:
This constitutes only an offer, and one method of terminating an offer is the expiration of a specified or reasonable length of time for the acceptance to be communicated.


8 .) An estimate of value derived by comparing a property with recently sold properties with similar characteristics most directly relate to
A.) The cost approach
B.) The income approach
C.) The sales comparison approach
D.) All of the above

C
Answer:
The sales comparison approach is commonly used in valuing single-family homes and land. Sometimes called the Market Data Approach or Comparative Market Analysis (CMA), it is an estimate of value derived by comparing a property with recently sold properties with similar characteristics.


3 .) When obtaining a mortgage loan, the buyer may have to pay points in order to obtain the loan. Considering the choices provided, what would be a true point a buyer might have to pay
A.) Sales point
B.) Loan point
C.) Discount point
D.) Risk point

C
Answer:
Loan points, also known as discount points, are a percentage of the loan amount.


5 .) A minority prospective purchaser asks to be shown homes but does not specify that they want to see homes located in a neighborhood where there are no minorities. How should a licensee decide what properties to show him
A.) The licensee has no obligation to show homes in non-minority neighborhoods to the prospect
B.) The licensee could assume that the prospective buyer is not interested in such homes
C.) The licensee does not need to provide service for the prospect at all
D.) The licensee may select homes for showing as he would for any other prospect

D
Answer:
The Fair Housing Laws and the Commissioner's Regulations insist that real estate licensees treat all customers and clients in an equal manner. An agent must be Color Blind.


10 .) To qualify a real property sales contract for recordation, it must
A.) Be signed by the buyer and acknowledged
B.) Be signed by the seller and acknowledged
C.) Contain a granting clause
D.) Be signed by both the buyer and seller and be acknowledged

D
Answer:
In order for a land contract to be accepted by the county recorder’s office for recordation, it must be signed by the buyer and seller and acknowledged by both of them.


12 .) John used $100,000 in cash to purchase a $500,000 property. He obtained a conventional loan for the remaining $400,000 needed to purchase the property. A year later, John sold the home for $550,000. What was Johns return on investment?
A.) 10%
B.) 15%
C.) 25%
D.) 50%

D
Answer:
If you invest $100,000 in cash and make a return of $50,000 above your purchase price your return on investment would be 50%.


5 .) Federal Open Housing Laws prohibit discrimination in the sale of which of the following types of properties
A.) A single-family residence sold with governmental loan assistance
B.) A 30-unit apartment building
C.) A single-family residence sold through a real estate broker
D.) All of the above

D
Answer:
The 1968 Federal Fair Housing Act prohibits discrimination in the sale of A, B & C.


3 .) A trustor defaults on his loan and refuses to reinstate the deed of trust. The most expedient thing for the beneficiary to do is to institute a
A.) Sheriff's sale
B.) Lien sale
C.) Trustee's sale
D.) Judicial foreclosure

C
Answer:
A trustee's sale would be the recommended procedure when there has been a default on a trust deed. It has many advantages over a judicial foreclosure.


7 .) The property taxes on residential real property are determined annually by the
A.) State Board of Equalization
B.) Board of Supervisors
C.) County assessor
D.) County treasurer

C
Answer:
The county assessor, who determines the assessed value of the property, determines the amount of the tax obligation.


6 .) What is the best term to describe ownership in real estate, but features a condition where, if violated, will cause the property be revoked without the owners consent
A.) A fee simple absolute
B.) A fee simple defeasible
C.) An estate in forfeiture
D.) A less than freehold estate

B
Answer:
Title which is conditioned on doing something or not doing something in the future is known as a fee simple defeasible title.


1 .) Brokers Jack and Frank both have an open listing on a property. Broker Jack showed the property to a prospective buyer and carried on negotiations, but the buyer decided not to buy. Two weeks later, Broker Frank contacted the same buyer and arranged a sale of the property. The seller would be obligated to pay a commission as follows
A.) Full amount to both Brokers Jack and Frank
B.) Full amount to Frank only
C.) Fifty percent each to Brokers Jack and Frank
D.) Full amount to Broker Jack who will have to settle with Broker Frank

B
Answer:
Under an open listing, the broker, who is the Procuring Cause of the offer, is the one who receives the commission.


9 .) Placing two or more contiguous units under common ownership for the purpose of increasing the value per unit is known as
A.) Terminus ownership
B.) Severalty ownership
C.) Plottage
D.) Disassemblage

C
Answer:
Placing two or more contiguous units under common ownership in order to increase the unit value is known as pottage.


5 .) Listing a home at an inflated price requiring minority prospects to pay that price, but accepting a lower price from other prospects
A.) Is a violation of the Fair Housing Laws by the seller only
B.) Could cause the listing salesperson and broker to be liable for money damages in a Fair Housing suit
C.) Is not a violation of the Fair Housing Law because the property is still available to minority prospects
D.) Is illegal only if an FHA or VA loan is being used to purchase the property

B
Answer:
To require minorities to pay higher prices than other people is discrimination under both federal and state law and subjects the licensees involved to liability for money damages.


5 .) What is the maximum amount that may be ordered paid from the Recovery Fund to satisfy valid claims against a licensee
A.) $50,000
B.) $100,000
C.) $250,000
D.) $500,000

C
Answer:
The maximum payment from the Recovery Account for claims (notice the plural) is $250,000.


11 .) Which of the following statements is false regarding townships
A.) All townships contain the same land area
B.) Townships have a standard number of sections
C.) Standard townships contain 36 square miles
D.) Townships are contained between range lines and township lines

A
Answer:
Some townships are not standard townships and do not have the same land area. Examples of these would be townships located on the coast or along a boundary line separating base and meridian areas.


7 .) When considering the advantages of a 1031 tax deferred exchange, which of the following would qualify for such treatment
A.) A four-plex sold to purchase a five-plex
B.) A vacation home sold to purchase a personal residence
C.) A 10 unit apartment complex sold to purchase 20 unit apartment complex
D.) None of the above will qualify for 1031 treatment

C
Answer:
In real estate, a 1031 exchange is a swap of one property for another that allows capital gains taxes to be deferred. A 1031 exchange is a swap of like kind properties. The properties being exchanged must be considered like-kind in the eyes of the IRS for capital gains taxes to be deferred.


1 .) Of the following, which answer does not express why it is crucially important to disclose who represents whom in a real estate transaction
A.) Because of the legal effect of such disclosure
B.) Because of the professional and ethical responsibility to do so
C.) Because of the doctrine of imputed notice
D.) So the principle knows whom they need to pay commission

D
Answer:
Answers A - C are a valid reason for the mandatory disclosure of one's agency relationship in a real estate transaction. Answer D is not correct as the payment of commission is not required in a real estate transaction. Imputed Notice means that any information given to one's agent is automatically assumed to be given to the principal.


8 .) Which of the following methods of valuation are most concerned with making provision for accruals for depreciation
A.) Market data and income
B.) Market data and cost
C.) Income and cost
D.) None of the above

D
Answer:
Only the income approach would make provision for accruals for depreciation. This would be done by the selection of a proper capitalization rate.


11 .) Two or more people can own as joint tenants
A.) A capitalization
B.) Real property only
C.) Personal property only
D.) Real or personal property

D
Answer:
Either real or personal property can be owned in joint tenancy.


5 .) Jack is a licensed real estate broker and just hired Sarah as an unlicensed assistant. Sarah has been preparing documents, delivering them to principals and having them signed. In regards to this activity
A.) This is illegal as this activity requires a real estate license
B.) This activity is legal if Sarah is licensed as a certified transaction coordinator
C.) These actions are legal if the activities are supervised by Jack
D.) These actions are legal if Sarah first obtains a notary license

C
Answer:
This is considered legal if these actions are supervised and approved by the broker.


3 .) Exclusive of the down payment, a home buyer would pay the lowest closing costs if he were to use
A.) A Cal-Vet loan
B.) An FHA loan
C.) A VA loan
D.) A conventional loan

A
Answer:
There are no points allowed on a Cal-Vet loan. On an FHA loan or a VA loan, the buyer may pay a 1% loan origination fee. Either the buyer or the seller may pay the points. On a conventional loan, the points are negotiable between the buyer and the seller.


2 .) By definition, an executed contract is one where
A.) The executor of an estate is the offeror
B.) Both parties have completely performed
C.) The contract is properly signed, notarized and recorded
D.) An initial version of the contract is destroyed

B
Answer:
That is the meaning of the term Executed. Executory means performance is still remaining to be completed.


6 .) The right granted by an owner of real property to a telephone company for the purpose of erecting poles to support telephone wires over the property creates
A.) An exclusive easement
B.) A specific lien
C.) An encumbrance
D.) A declaration of restrictions

C
Answer:
An easement granted to a utility company which does not own adjoining land is known as an easement in gross. This is a type of encumbrance.


10 .) A property is described as a 3-bedroom house located on a lot that measures 90' by 100' and located in a beautiful neighborhood at 642 South Main Street, Los Angeles, California. This would be a
A.) Metes and bounds description
B.) Physical description
C.) Government survey description
D.) Legal description

B
Answer:
A & C are both legal descriptions. But this question is a good example of a property physically being described.


2 .) When the circumstances are such that an award of money damages would not provide an adequate remedy for default in a contract, a suit for specific performance could be successfully brought by all of the following except
A.) One who is purchasing a single-family residence
B.) An attorney-in-fact for a principal who resides in another state
C.) A licensed real estate broker acting as agent for the principals
D.) The seller of vacant agricultural land

C
Answer:
In order to sue for specific performance, one must be a principal in the contract. In this case, the broker is not.


5 .) When the deposit receipt on the sale of a house states that the property is being sold As Is, it
A.) Also requires a real estate transfer disclosure statement
B.) Provides that the buyer should beware
C.) Means that nothing is warranted
D.) Does not require a real estate transfer disclosure statement

A
Answer:
The use of the phrase As Is in a real estate purchase contract has little effect. The seller still must deliver the real estate transfer disclosure statement to the buyer revealing anything that is wrong with the property.


8 .) In determining gain or loss on real property acquired by purchase, for federal income tax purposes, the term Unadjusted Basis most nearly means
A.) Original cost
B.) Original cost plus improvements minus losses
C.) Original cost plus or minus improvement costs, losses and depreciation
D.) Original cost minus losses.

A
Answer:
For federal income tax purposes in determining gain or loss on real property, the term Unadjusted Basis most nearly means the original cost.


9 .) A contract which authorizes a real estate agent to sell a property during a specified time and allows that person to collect a commission if the sale is made by anyone, including the owner, is
A.) An exclusive agency listing
B.) An exclusive right to sell listing
C.) An open listing
D.) A net listing

B
Answer:
With an exclusive right to sell listing, the agent receives a commission if the property is sold by anyone during a specified period of time.


3 .) When comparing the different types of REITs, all of the following are an REIT, except
A.) Equity trust
B.) Mortgage trust
C.) Investment trust
D.) Combination trust

C
Answer:
There are three types of REITs: An Equity Trust, A Mortgage Trust and A Combination Trust.


5 .) Jack is a licensed real estate broker and he is managing Bobs four-plex. Jack just accepted a $50 application fee for one of Bobs unit. Jack deposited this fee into his general operating fund instead of his trust account. In regards to this deposit
A.) Jack just commingled these trust funds
B.) Jack just converted the funds and will be subject to disciplinary action
C.) Jack must obtain written permission from Bob in order to keep the deposit in this account
D.) This is a perfectly acceptable action

D
Answer:
An application fee would be considered part of Jacks general operating funds. Jack will be using this money to run a background check, process the application and other items that are necessary in the selection process for a new tenant.


7 .) What is the term when a property is exchanged and is considered a swap of one investment property for another that allows capital gains taxes to be deferred
A.) Exemption
B.) 1031
C.) 4311
D.) Trustees sale

B
Answer:
In real estate, a 1031 exchange is a swap of one investment property for another that allows capital gains taxes to be deferred. The term, which gets its name from IRS code Section 1031.


2 .) When a counteroffer is made
A.) The original offer becomes a unilateral offer
B.) The offeree becomes the offeror
C.) The original offeror cannot amend his terms
D.) It is considered a partial acceptance of the original offer

B
Answer:
Suppose the buyer made the first offer. The buyer was the offeror and the seller was the offeree. When the seller makes a counteroffer, now the seller would become the offeror and the buyer the offer.


10 .) Which of the following would not terminate an offer to purchase real property
A.) The offeror communicates notice of revocation after the offeree has properly posted acceptance
B.) A counteroffer from the offeree
C.) Death or insanity of the offeror
D.) The offeree fails to accept the offer within the prescribed period given by the offeror.

A
Answer:
If the offeree sends through the post office the notice of acceptance, and the post office has been used by the offeror, when the offeree gives the acceptance to the post office, it creates a binding contract.


6 .) All of the following are factors generally considered when determining whether an item of personal property has become real property, except
A.) Agreement between the parties
B.) Permanence of the installation
C.) Cost of the article
D.) Relationship of the parties

C
Answer:
The five tests of a fixture can be tested by remembering MARIA. This means the: Method of attachment. Adaptability of the item. Relationship of the parties involved. Intention of the person attaching it. Agreement of the parties. The relative cost of an item is not considered.


10 .) The broker who most qualifies for a commission is the one who
A.) Gave the offer to the seller
B.) Received the offer from the buyer
C.) Received the acceptance of an offer
D.) Communicated the acceptance to the buyer

D
Answer:
The standard form of deposit receipt states that unless the acceptance is delivered to the buyer, there is no contract.


1 .) Every real estate broker must have a written agreement with each salesperson or broker associate. How long must this agreement be kept
A.) 2 years
B.) 3 years
C.) 5 years
D.) 10 years

B
Answer:
Every real estate broker must have a written agreement with each salesperson or broker associate. The broker and salesperson must both keep a copy of this agreement for 3 years


6 .) When a dam broke, the flow of water cut a strip of land from the river bank. This would be known as
A.) Accretion
B.) Alluvion
C.) Reversion
D.) Avulsion

D
Answer:
Avulsion is the sudden violent tearing away of land by water. Accretion is the process of gradual additions to land bordering a river or stream. Alluvion is the dirt that is added by accretion, and reversion refers to the rights of someone to property at a later time.


10 .) Which of the following is not a test for a fixture
A.) The intention of the parties
B.) The method of attachment
C.) The agreement of the parties
D.) The time of attachment

D
Answer:
The time of attachment is not a test for a fixture. The other items mentioned are all used to determine whether personal property has become real property, and thus a fixture.


5 .) If a real estate broker received a $400 check as a deposit with an offer on a Tuesday, and the seller is going to be out of town for the next week, the broker should
A.) Cash the check
B.) Put the deposit in his trust account within 3 business days
C.) Hold the check
D.) Return the check to the buyer until the seller returns

B
Answer:
A broker must deposit funds within 3 business days.


11 .) A broker who is acting as agent in the offering of property, may, without further authority from his principal
A.) Modify the seller's terms so they comply with the offer
B.) Cancel the sale if the buyer refuses to close within the agreed-upon terms
C.) Enter into a contract to convey the property to the buyer
D.) Accept the signature of the buyer on an offer to purchase which would be binding on the parties if the seller accepts

D
Answer:
A broker is an agent for his principal and cannot bind the principal.


6 .) In which of the following ways can a joint tenancy be created. By deed from
A.) Joint tenants to themselves and others as joint tenants
B.) Tenants in common to themselves as joint tenants
C.) A husband to himself and his wife as joint tenants
D.) All of the above

D
Answer:
A joint tenancy can be created in any of these ways.


2 .) Two years into a ten-year lease, the lessor and lessee agree to terminate the rental agreement, with the lessee vacating the property and the lessor not demanding any further payment of rent. This is known as
A.) Reformation
B.) Release
C.) Surrender
D.) Constructive eviction

C
Answer:
This is an example of the surrender of a lease, where the lease is terminated by mutual consent of the parties.


5 .) A new real estate salesperson made strong efforts to obtain listings in a non-integrated community. They found success by insinuating to property owners that if minorities move into the area, the value of their homes would decrease. Which of the following terms best describes the activities of this Salesperson
A.) Steering
B.) Puffing
C.) Blockbusting
D.) Redlining

C
Answer:
This activity is described as both panic selling and blockbusting.


11 .) Estate at sufferance most nearly means
A.) The conditions of the lease are unfair to the lessor
B.) A tenant is in possession after the expiration of his rights
C.) The terms of the lease are unfair to the lessee
D.) The property is heavily encumbered

B
Answer:
An estate at sufferance is created when the lessee retains possession after the expiration of his term.


7 .) According to generally accepted practices, an escrow agent is authorized to
A.) Give the buyers advice about the best financing which is available
B.) Change the escrow instructions when asked to by the listing broker
C.) Call for funding of the buyer's loan
D.) Authorize a pest control company to make corrective repairs

C
Answer:
In the usual escrow instructions, the buyer authorizes the escrow agent to call for the funding of the buyer's loan in order to close escrow. Termite repairs usually have to be authorized by the party who will pay for them, and the agent cannot change the escrow instructions without the written agreement of the buyer and seller. The agents, rather than the escrow company, would usually advise buyers concerning financing matters.


8 .) In appraising real property, a separate valuation for the site is considered least important
A.) In applying gross rent multipliers
B.) In applying the cost approach
C.) For depreciation purposes
D.) In applying the income approach

A
Answer:
The gross rent multiplier method is a variation of the income approach and does not involve separate valuation for the site.


2 .) Which of the following are necessary for a real property conditional installment sales contract to be valid
A.) Consideration, offer and acceptance, mutuality, competent parties, legally sufficient writing
B.) Consideration, offer and acceptance, expressed time element, price
C.) Lawful object, competent parties, meeting of the minds, legally sufficient writing
D.) Consideration, offer and acceptance, lawful object, competent parties, legally sufficient writing

D
Answer:
The five legal essentials in any contract are: Lawful object, In writing, Consideration, Competent parties and Offer with acceptance. Remember this as LICCO.


8 .) When an appraiser states that they are trying to determine the present worth of the future value of the property, they are more than likely referring to the principle of
A.) Balance
B.) Conformity
C.) Substitution
D.) Anticipation

D
Answer:
Principle of Anticipation is the present worth of the future value of the property. This is the basis for the income approach.


2 .) Of the following, what is considered a fact that the seller must be informed of
A.) The type of financing the buyer will be using
B.) The agent knows that a better offer is imminent
C.) The fact that agent will be leaving town for two days
D.) None of the above

B
Answer:
If the agent knows that a better offer is imminent, this is considered a material fact and the seller must be informed of it.


8 .) Basis plus improvement costs less depreciation taken is defined as
A.) Mortgage relief
B.) Nontaxable realized gain
C.) A recoverable loss
D.) Adjusted basis

D
Answer:
By definition.


8 .) When appraising real property by the replacement cost approach, which of the following would be least important
A.) Construction cost per square foot
B.) Rental cost per square foot
C.) Land cost
D.) Depreciation

B
Answer:
When using the replacement cost approach to appraising, the construction cost new of the building is calculated, then the depreciation is deducted and the value of the land is added on. At no time is the rent considered.


3 .) Conventional loans are distinguished from FHA insured loans by all of the following, except
A.) Conventional loans provide for a lower loan-to-value ratio
B.) FHA loans generally provide for a longer repayment period
C.) Conventional loans always permit a deficiency judgment, while FHA loans never allow them
D.) Interest rates on FHA loans are generally lower than those on conventional loans

C
Answer:
Deficiency judgments are not allowed on purchase-money encumbrances, whether they are conventional loans or FHA loans.


1 .) A real estate broker could be entitled to a commission after the expiration of the term of the listing under certain circumstances. To provide for this, which of the following clauses should the broker have in the listing agreement
A.) A use diligence clause
B.) The risk clause
C.) A safety clause
D.) A liquidated damages clause

C
Answer:
With a safety clause, if the broker has submitted a written list of names of people to whom he has shown the property to the seller, and the seller then enters into a sales agreement with any of the people on the list within a certain period of time, the broker is due a commission.


3 .) Which of the following agencies increases the availability of mortgage credit by maintaining a secondary market for residential conventional mortgages
A.) Federal Housing Administration
B.) Veterans Administration
C.) Federal Deposit Insurance Corporation
D.) Federal Home Loan Mortgage Corporation

D
Answer:
The Federal Home Loan Mortgage Corporation (Freddie Mac) buys and sells existing conventional loans.


6 .) In regards to the four government rights in land, which of the following is not one of those rights
A.) Escheat
B.) Eminent domain
C.) Police power
D.) Zoning

D
Answer:
To remember the 4 government rights in land, think of the name PETE: Police Power, Eminent Domain, Taxation & Escheat. Zoning is the Governments best example of Police Power, but not one of the four government rights in land.


9 .) In regard to the capitalization rate
A.) As it increases, value of property increases
B.) As it decreases, value of property decreases
C.) As it increases, value of property decreases
D.) Changing capitalization rate has no effect on value of property

C
Answer:
The higher the Cap Rate, the lower the value, the more risk the investment is said to have.


7 .) The person named in a will to carry out its provisions is known as
A.) An administrator
B.) A trustee
C.) An attorney-in-fact
D.) None of the above

D
Answer:
The stem of the question defines an executor or executrix.


2 .) Of the following, what can be considered consideration in a contract
A.) Jewelry
B.) Cash
C.) Services
D.) Any of the above

D
Answer:
Consideration for a contract may be anything considered to be valuable by the parties involved.


7 .) Of the following types of deeds, which one would contain no warranties, expressed or implied
A.) A trust deed
B.) A quitclaim deed
C.) A bargain and sale deed
D.) A grant deed

B
Answer:
Of the deeds listed, the quitclaim deed is the one in which there are no warranties or covenants, expressed or implied. It is a deed in which the grantor quits their claim to the property, and releases any interest which they may have.


11 .) Functional obsolescence might be attributed to each of the following except
A.) No air conditioning in a commercial building in a warm climate
B.) The proximity of obnoxious nuisances
C.) Outmoded or outlandish design
D.) Improvements which have lost their usefulness

B
Answer:
Functional obsolescence is loss of value due to style, design, or floor plan. Nearby nuisances would be social obsolescence, not functional obsolescence.


3 .) A balloon loan could also be described as a
A.) Non-assumable loan
B.) Due-on-sale loan
C.) Partially-amortized loan
D.) Fully-amortized loan

C
Answer:
A balloon loan is one which incorporates a balloon payment. It would be only partially amortized, since the installments do not fully retire the debt.


1 .) What type of agent is authorized to conduct a series of transactions involving a continuity of service
A.) General agent
B.) Special agent
C.) Universal agent
D.) Dual agent

A
Answer:
A general agent is one who is authorized to conduct a series of transactions involving a continuity of service.


1 .) In practice, the services of a broker on behalf of a principal are defined as all of the following, except
A.) An agency relationship
B.) A fiduciary relationship
C.) An attorney in fact relationship
D.) A broker/client relationship

C
Answer:
A broker does not normally have a power-of-attorney.


1 .) Broker Bob took a listing on Jacks property. Jack stated that he wanted to have the option of finding the buyer himself and if he did he wold not pay a commission to Bob. What kind of listing would this be
A.) Exclusive right to sell listing
B.) Open listing
C.) Net listing
D.) Sellers reserved listing agreement

D
Answer:
Under a Seller Reserved Listing Agreement / Exclusive Agency, the listing agent has a right to the commission specified in the listing agreement if the real property is sold by anyone, other than the owner, during the time period of the listing agreement, or if the listing agent procures a ready, willing and able buyer, even if the property is not sold.


8 .) In regard to the capitalization rate
A.) As it increases the less risk the investment is said to have
B.) As it decreases the less risk the investment is said to have
C.) As it increases the more risk the investment is said to have
D.) As it decreases the more risk the investment is said to have

C
Answer:
The higher the cap rate, the lower the property value and the more risk the investment is said to have.


8 .) If an appraiser determines the value of a property by considering recently sold properties that have similar utility, they are using a process which is called
A.) Market data method
B.) Breakdown method
C.) Cost approach
D.) Capitalization

A
Answer:
The sales comparison approach is commonly used in valuing single-family homes and land. It is an estimate of value derived by comparing a property with recently sold properties with similar characteristics.


5 .) A real estate salesperson's license has been suspended because money was paid out of the Recovery Account to a person who had a judgement against the salesperson. The license will not be reinstated until
A.) The salesperson pays the person any amount not paid by the Recovery Account
B.) The salesperson pays the Recovery Account for half of the money plus interest
C.) The salesperson pays the Recovery Account for the money it paid plus interest
D.) The salesperson pays the Recovery Account and the person all money due plus interest

C
Answer:
The licensee must reimburse the Recovery Account for all of the money it paid out plus interest before the license can be reinstated.


7 .) Of the following, which would most likely not be debited to the seller by escrow
A.) Recording of the deed in favor of the purchaser
B.) Drawing the deed in favor of the purchaser
C.) Notary fees on the deed in favor of the purchaser
D.) Recording fees for a reconveyance deed

A
Answer:
The buyer, not the seller, would be debited for deed recording.


6 .) When owners hold title as tenants in common, each person
A.) Each owns a specific part of the property
B.) Does not own a specific part of the property
C.) Must have acquired his interest at the same time as the other two
D.) Must be mentioned in the single title instrument (will or deed).

B
Answer:
Tenants in common hold an undivided interest in real or personal property. Therefore, tenants in common own no specific part of the property.


2 .) Of the following, which contract goes from bilateral to unilateral
A.) A listing agreement
B.) A purchase agreement
C.) A lease option
D.) No contract can go from bilateral to unilateral

C
Answer:
A lease option is a type of contract that starts as bilateral, and once signed, is unilateral. That is, only the seller needs to perform if the option is exercised.


1 .) Assume a seller and broker enter into a 90 day listing agreement which expires before a buyer is found. The seller instructs the broker to continue working on finding a buyer, but does not sign a written extension of the listing agreement. Can the broker recover a commission if a buyer is procured?
A.) Yes, the seller gave a verbal agreement to extend
B.) Yes, the seller is bound by the listing agreement
C.) Yes, the broker has performed according to the contract
D.) No, the agreement was expired

D
Answer:
In this situation the agreement is expired, so no agreement is technically active. The seller could choose to pay a commission but would not be bound to do so.


11 .) In which of the following transactions would a Real Property Transfer Disclosure Statement be required
A.) The State of California is selling a parcel of real property
B.) A transfer of title between spouses in connection with a divorce
C.) A city official is selling his residence
D.) A tenant in common is transferring his interest to another co-tenant

C
Answer:
Even a city official, when selling his/her own personal residence, is required to deliver a Transfer Disclosure Statement to the buyer. The other transactions listed would not require the Statement.


7 .) When buying his home, a purchaser was given a grant deed and a standard policy of title insurance. Which of the following items would be warranted by the seller but not covered by the policy of title insurance
A.) That the grantor is legally competent
B.) That the grantor actually signed the deed
C.) That there are no undisclosed liens against the property placed there by the grantor
D.) That there are no forged deeds in the chain of title

C
Answer:
A grant deed carries an implied warranty that there are no undisclosed liens against the property placed there by the grantor. The standard policy of title insurance carries no such protection.


11 .) When the buyer is given a defective Transfer Disclosure statement which contains obvious omissions about the condition of the property, the buyer can bring legal action against the seller and real estate licensee within
A.) One year
B.) Two years
C.) Five years
D.) Seven years

B
Answer:
Buyers have two years to sue a seller because of a defective Transfer Disclosure Statement.


11 .) In order for a broker to be able legally to claim a commission on an exclusive right to sell listing, which of the following termination dates would be appropriate
A.) Until either principal or agent gives proper notice of rescission
B.) For 120 days after completion of the improvements
C.) For 180 days from the date the listing agreement is signed by the contracting parties
D.) For 90 days after a conditional commitment is issued by the FHA

C
Answer:
An exclusive right to sell listing requires a specific termination date in order for the broker to claim a commission. Only answer "C" meets that requirement.


1 .) What states that a principal is liable for the acts of their agent within the scope of authority granted
A.) Principle of estoppel
B.) Warranty of authority
C.) Apparent authority
D.) All of the above are true

B
Answer:
Warranty of Authority states that a principal is liable for the acts of their agent within the scope of authority granted. In other words, the seller and the agent can be held responsible for any misrepresentations.


3 .) When a purchaser under a land contract is paying the seller impounds for taxes and insurance, those payments may not be disbursed for any other purpose without the consent of the
A.) Trustee
B.) Holder in due course
C.) Seller
D.) Payor

D
Answer:
The one paying the impounds, the payor, is the only one who can authorize a different expenditure of those funds.


9 .) Why is the replacement cost approach easier to apply to a new building than an old building
A.) Because of depreciation estimates
B.) Because historic costs are hard to obtain
C.) Because of land valuation problems
D.) Because of building code changes

A
Answer:
In the replacement cost approach to appraisal, depreciation plays a very important part in the estimate of the value. The newer the building, the easier to determine the depreciation.


5 .) Based on the court case of Easton v. Strassburger, what new requirement was added to all residential property sales
A.) The agency disclosure statement
B.) The natural hazards disclosure statement
C.) The real property transfer disclosure statement
D.) That racial discrimination is prohibited in all property matters

C
Answer:
Based on the court case, Easton v. Strassburger, a Real Property Transfer Disclosure Statement is required when the sellers or transferors, of one-to-four unit dwellings.


6 .) Private restrictions on land can be created
A.) Only by deed
B.) By deed or by written agreement
C.) By deed, written agreement, or zoning ordinances
D.) By deed or zoning ordinances

B
Answer:
Statement of fact.


3 .) When a home loan is officially in default, the bank must file a Notice of Default with the court. They also must let the borrower know they’ve filed Notice of Default within
A.) 3 Days
B.) 5 Days
C.) 10 Days
D.) 30 Days

C
Answer:
When a home loan is officially in default, the bank must file a Notice of Default with the court and have to let the borrower know they’ve filed it within 10 days. The Notice of Default is an official legal document informing the borrower that they are in a state of default on the loan.


3 .) In its decision concerning the making of an FHA loan, a lending institution is least affected by
A.) Demand and supply of mortgage funds
B.) Mortgage insurance rate
C.) The liquidity of the investment
D.) Current discount rate

B
Answer:
The mutual mortgage insurance rate on an FHA loan is always fixed by law, and the borrower pays it. Therefore, it would not influence the lender's decision.


2 .) A contract which, according to the Statute of Frauds, must be in writing in order to maintain a court action for enforcement is
A.) The employment of a business opportunity broker to sell the stock, fixtures, and goodwill of a business
B.) The employment of a business opportunity broker to find a business to be purchased by his principal
C.) The employment of a broker to exchange leases on properties zoned for retail business
D.) Any agreement which is not to be performed within one year

D
Answer:
Statement of fact


8 .) The maximum potential income which any income-producing property is capable of generating is known as
A.) Gross scheduled income
B.) Gross effective income
C.) Net operating income
D.) Net spendable income

A
Answer:
The gross scheduled income is the maximum potential income that an income-producing property is capable of producing under ideal conditions. For example a 100% occupancy at 100% maximum rental rate.


1 .) When is the principle not allowed to revoke agency
A.) When the broker refuses to revocation
B.) When escrow denies the revocation
C.) When it is coupled with an interest
D.) The principle cannot revoke agency

C
Answer:
The principal has an absolute power under the law to revoke the agency at any time, unless the agency is coupled with an interest.


5 .) Which of the following is primarily responsible for disclosure to the buyer of an existing Mello-Roos tax assessment on a parcel of real property
A.) The seller
B.) The listing agent
C.) The selling agent
D.) The local tax collector

A
Answer:
The seller must disclose any Mello-Roos assessments to the buyer.


7 .) Escrow instructions should be
A.) Recorded
B.) Notarized
C.) Confusing
D.) Executed

D
Answer:
Escrow instructions are executed (signed) by the parties to the escrow and are executed (performed) by the escrow officer.


2 .) As far as fiduciary duties owed to a principle are concerned, what fiduciary duties remain after termination of agency
A.) Reasonable care
B.) Confidentiality
C.) Loyalty
D.) No fiduciary duties are owed after termination of agency

B
Answer:
Confidentiality & Accounting are still owned after termination of agency. Even after closing these fiduciary duties never expire.


3 .) A real estate broker negotiated a loan for a homeowner who gave the lender a promissory note and a second trust deed for $12,500. Which of the following would most likely be used by the broker in the transaction
A.) Real property securities statement
B.) Broker's loan statement
C.) Real property securities permit
D.) Closing statement

B
Answer:
The broker's loan statement in this example is also referred to as the mortgage loan disclosure statement which is given to the borrower by the broker.


1 .) Which of the following would create a dual agency situation
A.) Broker has two simultaneous escrows on the same property
B.) Listing broker is cooperating with a selling broker
C.) Two brokers have listings on the same property
D.) A broker representing both buyer and seller in the same transaction

D
Answer:
A dual agency occurs if the broker represents both parties (buyer and seller) in the same transaction.


1 .) What is owed to a customer in regards to an agents fiduciary obligations
A.) Obedience & Loyalty
B.) Reasonable care & Disclosure
C.) Loyalty & Confidentiality
D.) Accounting & Disclosure

D
Answer:
A customer is owed disclosure of everything known and the accounting of money. No Other Fiduciary Duty Is Owed


7 .) When real property is being escrowed, the escrow holder may do which of the following
A.) Accept written instructions from the seller and buyer to change the price and terms without the approval of any agents
B.) Receive closing funds on the buyer's behalf from the broker's trust account
C.) Try to settle a disagreement between the buyer and seller
D.) Cancel the escrow if the buyer doesn't perform in a timely manner

A
Answer:
The buyer and seller are the principals to the transaction and they may mutually change the escrow instructions without the approval of anyone else. The buyer's closing funds cannot be accepted from anyone except the buyer. Perhaps the buyer does not want to close the escrow for some reason which is unknown to the broker.


1 .) If two parties want to create an enforceable broker-principal relationship concerning a right, title, or interest in real property, the most essential element to do so would be
A.) Written authority for the broker to accept a deposit
B.) A written offer to purchase
C.) A written employment contract
D.) An agreement concerning the commission

C
Answer:
A written employment contract would be, of the items listed, most essential to create an enforceable contract. Remember that another name for a listing agreement is an employment contract.


6 .) If a person buys a property in a California land project and then changes his mind, he can obtain a refund of his money without a specific reason within how long
A.) 3 calendar days
B.) 5 calendar days
C.) 10 calendar days
D.) 14 calendar days

D
Answer:
A land project is a special type of California subdivision in which the buyer has a 14-day rescission period.


2 .) Which of the following statements concerning options is false
A.) The provisions of the lease, in a lease option, are sufficient consideration for the option
B.) The optionee has no rights in the land
C.) The option binds the optionee to performance
D.) The optionee must give the optionor some consideration

C
Answer:
The optionee / potential buyer has the right, but not the obligation, to purchase the property. They are not bound to perform. Only the optionor is bound to perform.


9 .) When renting residential property, the amount of a deposit which a lessor may legally receive from a lessee is determined in part by which of the following
A.) The number of square feet in the building
B.) Whether the unit is furnished or not
C.) The number of children and pets who will occupy the premises
D.) The going market rate in the area where the property is located

B
Answer:
The maximum deposit a landlord can legally receive depends on whether or not the unit is furnished. The basic rule is two month's rent on an unfurnished unit, three month's rent on a furnished unit.